Preparation

Assignment Exercise 101: Components of Balance Sheet and Statement of Net Income

Refer to the Metropolis Health System (MHS) financial statements contained in Appendix 28-A. Use the MHS comparative balance sheet statement of revenue and expenses and statement of fund balance for this assignment.

Required

Identify the following MHS balance sheet components. List the name of each component and its amount(s) from the appropriate MHS financial statement.

Current Liabilities

Total Assets

Income from Operations

Accumulated Depreciation

Total Operating Revenue

Current Portion of Long-Term Debt

Interest Income

Inventories

Assignment Exercise 102: Components of Balance Sheet and Income Statement

Refer to the Metropolis Health System (MHS) balance sheet and statement of revenue and expense in Chapter 28s MHS Case Study. Patient accounts receivable of $7400000 is shown as net of $1300000 allowance for bad debts (8700000 1300000 = 7400000). (1) What percentage of gross accounts receivable is the allowance for bad debts? (2) If the allowance for bad debts is raised to $1500000 where does the extra $200000 go?

Assignment Exercise 103: Components of Balance Sheet and Income Statement

Refer to the Metropolis Health System (MHS) balance sheet and statement of revenue and expense inChapter 28 MHS Case Study. Property plant and equipment of $19300000 is shown as net meaning net of the reserve for depreciation. If the $19300000 is reduced by $200000 (meaning the reserve for depreciation has risen) what happens on the income statement?

Assignment Exercise 111: Liquidity Ratios

Refer to the Metropolis Health System (MHS) case study in Chapter 28.

Required

1. Set up a worksheet for the liquidity ratios.

2. Compute the four liquidity ratios using the Chapter 28 MHS financial statements.

Assignment Exercise 112: Solvency Ratios

Refer to the Metropolis Health System (MHS) case study in Chapter 28.

Required

1. Set up a worksheet for the liquidity ratios.

2. Compute the solvency ratios using the Chapter 28 MHS financial statements.

Assignment Exercise 113: Profitability Ratios

Refer to the Metropolis Health System (MHS) case study in Chapter 28.

Required

1. Set up a worksheet for the liquidity ratios.

2. Compute the profitability ratios using the Chapter 28 MHS financial statements.

Assignment Exercise 121: Unadjusted Rate of Return

Metropolis Health Systems Laboratory Director expects to purchase a new piece of equipment. The assumptions for the transaction are as follows:

Average annual net income = $70000

Original investment amount = $410000

Unrecovered asset cost at the end of useful life (salvage value) = $41000

Required

1. Compute the unadjusted rate of return using the original investment amount.

2. Compute the unadjusted rate of return using the average investment method.

Assignment Exercise 122: Finding the Future Value (with a Compound Interest Table)

John Whitten is one of the physicians on staff at Metropolis Health System. His practice is six years old. He has set up an office savings account to accumulate the funds to replace equipment in his practice. Today John is trying to figure what his equipment fund will amount to in four more years.

The equipment fund savings account presently has a balance of $63500 and any interest earned over the next four years will be left in the account. John assumes the annual interest rate will be 5%. How much money will be in the account at the end of four more years?

Required

Compute how much money will be in the account at the end of four more years. (Use the compound interest table found in Appendix 12-B.)

Assignment Exercise 123: Finding the Present Value (with a Present-Value Table)

Part 1Dr. John Whitten is still figuring out his equipment fund. According to his calculations he needs $250000 to be accumulated six years from now. John is now trying to find the present value of the $250000. He continues to assume an interest rate of 5%.

Required

Compute the present value of $250000 accumulated fifteen years from now. Assume an interest rate of 5%. (Use the Present-Value Table found in Appendix 12-A at the back of this chapter.) Part 2John doesnt like the answer he gets. What if he can raise the interest rate to 7%? How much difference would that make?

Required

Compute the present value of $250000 accumulated fifteen years from now assuming an interest rate of 7%. Compare the difference between this amount and the present value at 5%.

Assignment Exercise 124: Computing an Internal Rate of Return

Dr. Whitten has decided to purchase equipment that has a cost of $60000 and will produce a pretax net cash inflow of $30000 per year over its estimated useful life of six years. The equipment will have no salvage value and will be depreciated by the straight-line method. The tax rate is 50%. Determine Dr. Whittens approximate after-tax internal rate of return.

Assignment Exercise 125: Payback Period

The MHS Chief Financial Officer is considering alternate proposals for the hospital Radiology department. The Director of Radiology has suggested purchasing one of two pieces of equipment. Machine A costs $15000 and Machine B costs $12000. Both machines are estimated to reduce radiology operating costs by $5000 per year.

Required

Which machine should be purchased? Make your payback calculations to provide the answer.

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